Susan Tompor: Five things you should know about your money in 2019

Fear that the next recession is around the corner has been knocking down stock prices and our 401(k) plans. Word that General Motors will be aiming to close some factories next year only fuels the worry.

What started as a fairly optimistic year is gradually turning more and more pessimistic.

Yet will 2019 really be as bad as some might think it looks? Here’s a glimpse at what could happen ahead:

What about the next recession?

Sure, more red flags are out there — including mounting corporate debt, higher borrowing costs and the ongoing tariffs that are part of the trade war.

We saw shocking, one-day declines of 559 points and 799 points for the Dow Jones industrial average during the first week of December. The Dow was down about 1.2 percent for the year through Dec. 10.

While recession risk is rising, many say solid growth in the nation’s gross domestic product indicates that recession isn’t in the cards for 2019. But 2020 is looking iffier.

“I have increased my odds of a recession over the next 24 months to 40 percent,” Dye said. He had put the odds at 35 percent in October.

Kurt Rankin, an economist for the PNC Financial Services Group, said he’d still put the odds of a recession beginning in 2019 at one in four. If a recession doesn’t take place next year, the odds go up to 40 percent that a recession would hit in 2020, he said.

“Recessions don’t occur just because the economy has been expanding too long,” Rankin said.

Even so, he wouldn’t use a word like “robust” to describe the kind of year to expect.

Think more in terms of “stable, uninspired, unexciting” for 2019, he said.

How high can interest rates go?

Many economists, though, are dialing down their forecasts for rate hikes in 2019. Instead of three or four more rate hikes, many now say the Fed will slow its pace and nudge up rates one or two times in 2019.

PNC’s Rankin expects the Fed to hold tight early next year and move to raise rates at meetings in June and September.

Growing storm clouds, though, mean the Fed likely would need to stop raising rates by late 2019 — and possibly move in another direction.

Make sure you’re prepared to ride out a storm, though, by taking care to have cash in an emergency fund — and not blindly plowing every dollar into your 401(k).

Will it cost me more to borrow in 2019?

Short answer, depends what you’re buying.

If you’re shopping for a home, there’s a chance that rates can fall from here.

The 30-year mortgage rate is around 4.9 percent on average and could be heading toward 4.5 percent by the end of 2019, according to Greg McBride, chief financial analyst for Bankrate.com.

The lower rate is likely if the economy slows down and we edge closer to a full-fledged recession in 2020.

A higher rate — closer to 5.5 percent — could be possible for mortgages if the economy keeps humming along and inflation picks up, he said.

McBride, though, says it seems more likely that mortgage rates will drop a bit later in 2019 as the economy loses steam.

If you’re planning to buy a car, expect to pay higher rates since car loans track actions taken by the Federal Reserve more closely.

A five-year new car loan is averaging around 4.9 percent now, according to Bankrate.com. The average rate on a four-year used car loan is 5.72 percent.

“With another rate hike this month, and two next year, by the end of 2019 auto loan rates will average 5.35 percent on a five-year new car loan and 6.2 percent on a four-year used car loan,” McBride said.

What’s likely to happen to auto sales?

Charles Chesbrough, senior economist at Cox Automotive, is forecasting light vehicle sales in the 16.6-million range in 2019, that’s down from a projected 17.1 million to 17.2 million cars and light trucks sold in 2018.

“These higher interest rates are starting to take a bite out of consumers’ wallets,” Chesbrough said.

He expects two, possibly three, more rate hikes from the Fed in 2019. Higher rates drive up borrowing costs, so it could be more costly to finance or lease a car later in the year.

Even so, he noted that 16.6 million is a fairly strong year for auto sales.

General Motors is shifting away from its mix of sedans and small cars to focus on the production of more profitable SUVs and trucks, as part of a restructuring plan to stay ahead of any broader economic downturn.

But overall, the U.S. jobs picture, including the auto industry, is expected to be good.

“We’re not expecting any kind of collapse in the market,” he added.

Susan Tompor is the personal finance columnist for the Detroit Free Press. She can be reached at stompor@freepress.com.